Force Majeure in the UAE: Can You Legally Exit a Contract?

Welcome back to Lawgical with Ludmila, where we untangle the legal knots so that you do not have to. I am Ludmila Yamalova, a U.S.-qualified lawyer based in Dubai. In each episode, we break down complex law into clear, practical insights that you can actually use.

The topic of today’s discussion is force majeure, a concept that becomes particularly relevant in times of economic and regional uncertainty. Recent developments in the Middle East understandably place pressure on both businesses and individuals.

While there is always hope for stability, the reality is that many are facing operational disruptions, financial strain, and difficulty meeting contractual obligations. In response, governments have introduced economic relief measures aimed at supporting businesses. These initiatives have provided meaningful assistance in certain sectors. However, for many others, the relief may not be sufficient to offset ongoing challenges.

As a result, a growing number of businesses and individuals are now asking: can I suspend or terminate my contractual obligations? What legal options do I have to reduce exposure and liability? Is there a way to exit agreements and transactions with minimal penalties?

This is where the concept of force majeure often enters the conversation. Before attempting to invoke it, it is important to understand what force majeure means in general, how it is applied under UAE law, and, critically, when it does and does not offer relief.

What Is Force Majeure Under UAE Law?

In the UAE, force majeure is a legal concept that exists in many jurisdictions. In the UAE, it is derived from two primary sources.

1. Statutory Law

This refers to the written law itself, where the concept of force majeure is described.

2. Judicial Interpretation

This refers to how UAE courts interpret the law when force majeure arguments are raised before them.

So, to understand force majeure properly, it is necessary to look at both the legal framework and the way the courts have applied it in practice.

The Legal Framework: UAE Civil Transactions Law

The concept of force majeure appears in the UAE Civil Transactions Law.

Interestingly, until recently, this law was one of the few UAE laws that had not been significantly amended despite the broad legislative changes introduced from 2020 onwards. The original law is Federal Law No. 5 of 1985.

A new law has since been introduced to replace it: Federal Decree Law No. 25 of 2025. However, that new law does not come into force until June 2026.

Because this episode was recorded in April 2026, the older law is still the operative law for now. That said, both the previous and new laws contain the same force majeure provision in Article 273(1), and the language is effectively unchanged.

This tells us two important things. First, force majeure is not a new concept in the UAE. Second, the UAE legislature has clearly considered the existing definition sufficient, since it has preserved the wording across nearly 40 years.

The Legal Definition of Force Majeure

Article 273(1) states:

“In contracts binding on both parties, if force majeure supervenes which makes the performance of the obligation impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled.”

That is the legal definition of force majeure in the UAE.

It is short, but it contains several important elements. In particular, it focuses on one key standard: impossibility of performance.

The law itself does not provide a list of examples such as war, natural disasters, or strikes. Nor does it go into detail about the conditions required for an event to qualify as force majeure. Instead, much of the practical meaning has been developed by the courts.

The Three Conditions Applied by UAE Courts

Over time, UAE courts have consistently applied three cumulative conditions when assessing force majeure.

1. Unforeseeability

The event must not have been reasonably foreseeable at the time the contract was entered into.

For example, in past real estate disputes, developers argued that subcontractors’ failures amounted to force majeure. However, the courts rejected that argument because subcontractor default is a foreseeable business risk in that industry.

2. Absolute Impossibility of Performance

The event must make performance absolutely impossible, not just difficult, delayed, or more expensive.

This is one of the most important distinctions in force majeure analysis. Financial hardship, inconvenience, or commercial disadvantage alone do not meet the legal threshold.

3. Direct Causation

There must be a direct link between the event and the inability to perform the obligation.

In other words, it is not enough that difficult circumstances exist generally. The specific event being relied on must be the reason performance has become impossible.

These three conditions are cumulative, which means all of them must be satisfied.

Why Force Majeure Is Applied Strictly

UAE courts apply force majeure narrowly and cautiously. That is because the legal consequence is serious. If force majeure is established, the contract is automatically cancelled.

Since this can have significant consequences for the other party, the courts set a high threshold. Force majeure is not a broad excuse to escape contractual obligations. It is a limited doctrine reserved for exceptional cases.

It is also highly fact-specific. Whether force majeure applies depends on the exact contract, the exact event, and the exact impact on performance.

Do You Need a Force Majeure Clause in the Contract?

No. A contract does not need to contain a force majeure clause for force majeure to be available under UAE law.

That is because force majeure is a doctrine established by law, not merely by contract. It exists independently through Article 273(1) of the UAE Civil Transactions Law.

However, a force majeure clause in a contract can still be useful.

Why a Contractual Clause Helps

A well-drafted clause can:

• reduce ambiguity,
• define specific events that the parties agree should qualify,
• clarify remedies and consequences, and
• reduce the likelihood of disputes.

That said, even a detailed contractual clause does not guarantee that everything listed will be legally enforceable. Courts will still apply the underlying legal test of unforeseeability, impossibility, and causation.

So, if a clause includes an event that the courts consider foreseeable, the courts may still reject it as force majeure.

Is a Government Declaration Required?

No. A government declaration is not required in order to invoke force majeure in the UAE.

This is a common misunderstanding. Some assume that unless the government formally declares a situation to be force majeure, parties cannot rely on it. That is not correct.

Force majeure is assessed on a case-by-case basis. It is often transaction-specific and industry-specific. One sector may be seriously affected by an event, while another may not be affected at all — or may even benefit from it.

So the question is not whether the government has declared force majeure, but whether the legal test is satisfied in the specific case.

What Happens If Force Majeure Applies?

Under UAE law, the consequence is severe.

If force majeure is established, the corresponding obligation ceases and the contract is automatically cancelled by operation of law.

This is notable because, under UAE law more broadly, contracts often require court involvement to be terminated. But in the case of force majeure, the law itself states that cancellation is automatic.

Of course, if the parties disagree about whether force majeure actually exists, the issue may still end up before the court. But where the parties agree that the legal threshold has been met, the contract can come to an end without further action.

Can Force Majeure Delay Performance Instead of Ending the Contract?

In some jurisdictions, force majeure may suspend obligations temporarily before eventually leading to termination.

The UAE law does not expressly set out that two-stage approach. Its wording refers directly to cancellation.

However, there may still be room in practice for courts to interpret the law more flexibly where a party is not seeking to walk away altogether, but simply argues that temporary circumstances make performance impossible for a period of time.

This would likely depend on the particular facts and the commercial context.

Force Majeure and Current Business Disruption in the UAE

In light of recent regional security and geopolitical developments, many businesses in the UAE are facing operational disruption and financial pressure.

As a result, many are asking:

• Can we delay performance on existing contracts?
• Can we exit contracts altogether?
• What legal options do we have?

Some of the sectors most immediately affected include:

• aviation,
• hospitality,
• tourism,
• trade-dependent industries, and
• businesses built around short-term rentals and event-driven activity.

Because the UAE economy is closely linked to tourism, travel, hospitality, and international movement, disruptions in these sectors can quickly affect a wide range of commercial arrangements.

Real Estate Transactions: Can Buyers Rely on Force Majeure?

One area where many questions arise is real estate.

This includes buyers who have:

• paid deposits,
• issued cheques,
• signed MOUs, SPAs, or Form Fs,
• and committed to complete property transactions.

Now, due to changed circumstances, some wish to walk away.

When Force Majeure Is Unlikely to Apply

If the buyer simply believes the property market may soften, or that the same property may soon be available for less, that is not force majeure. That may be a commercial concern, but it does not make the transaction impossible.

When a More Serious Argument May Exist

A stronger example may be where the transaction depends on financing and the buyer:

• loses their job,
• loses financial liquidity, or
• is unable to obtain the required mortgage approval.

In that case, depending on the contract wording and the surrounding facts, there may be grounds to argue that the transaction can no longer proceed.

Even then, the issue remains highly fact-specific.

Commercial Solutions Outside Force Majeure

Even where force majeure does not apply, parties may still negotiate a practical resolution.

For example, in many real estate transactions, buyers worry about losing the full 10% deposit. But the 10% figure is not mandated by law as the only possible outcome. It is often used as a market practice. In many cases, sellers may be open to agreeing on another amount rather than forcing the issue through litigation.

Rental Contracts: Residential and Commercial Pressure

Another key area is rental contracts.

This includes:

• residential tenants who have lost jobs or income,
• commercial tenants whose businesses have slowed or stopped, and
• short-term rental operators whose revenue depends on tourism.

In these situations, force majeure may potentially be argued, but again, it depends entirely on the specific facts.

A Practical Approach

In many of these cases, the better solution may be commercial negotiation rather than litigation.

If a tenant has lost their job or revenue stream, taking legal action may cost the landlord additional time, money, and effort, without guaranteeing meaningful recovery.

As seen during COVID, parties can often reach workable arrangements such as:

• temporary rent reductions,
• deferred payments,
• revised payment structures, or
• temporary amendments with the option to return to the original terms later.

These can all be documented contractually and may offer a more practical solution than a force majeure dispute.

Conclusion

Force majeure is often seen as a legal escape route in times of uncertainty. But under UAE law, it is a narrow and strictly applied doctrine.

It is not enough that the market has shifted, that business conditions have worsened, or that performance has become commercially burdensome. The legal threshold remains clear:

• the event must be unforeseeable,
• the impact must make performance impossible,
• and there must be a direct causal link between the two.

Only when all of these elements are satisfied will force majeure apply. And when it does, the consequence is serious: the contract comes to an end.

Across real estate, rental agreements, and commercial contracts, the same principles apply. Each case depends on the contract, the event, and the actual impact.

In many situations, force majeure will not apply. But that does not mean parties are without options. In practice, the most effective path is often early legal assessment, clear communication with the other side, and practical negotiation wherever possible.

That is all for this episode of Lawgical. If you found this useful, you can find more on our website: lylawyers.com. We are also on Apple Podcasts and Spotify. And for the full experience, you can watch the video podcast on YouTube.

Until next time: stay informed, stay safe, and keep things Lawgical.